Chapter 2, Problem 2.3AA

1.

To determine

Concept Introduction:

Debt ratio: The debt ratio measures the percentage of shares financed by debt, the higher debt ratio is considered riskier for the business, because a higher debt ratio indicates the larger portion of assets are funded by external debt, it is computed as total liabilities divided by the total of assets.

  $\text{Debt ratio}=\frac{\text{Total}\text{liabilities}}{\text{Total}\text{}\text{assets}}$

The debt ratio for A in the current year and prior year.

2.

To determine

Concept Introduction:

Debt ratio: The debt ratio measures the percentage of shares financed by debt, the higher debt ratio is considered riskier for the business, because a higher debt ratio indicates the larger portion of assets are funded by external debt, it is computed as total liabilities divided by the total of assets.

  $\text{Debt ratio}=\frac{\text{Total}\text{liabilities}}{\text{Total}\text{}\text{assets}}$

The Debt ratio for G in the current year and prior year.

3.

To determine

Concept Introduction:

Debt ratio: The debt ratio measures the percentage of shares financed by debt, the higher debt ratio is considered riskier for the business, because a higher debt ratio indicates the larger portion of assets are funded by external debt, it is computed as total liabilities divided by the total of assets.

The company has a high degree of financial leverage in the current year.